Private Financial Flows
These are financial flows that originate with non-governmental entities, such as individuals, charities, and private firms. In decreasing order of magnitude, there are four private financial flows: foreign direct investment, international bank loans, international portfolio investments, and international bonds.
You have made a series of choices as the Secretary of Economic Development of Kashmir. Let's analyze each of your choices.
The Washington Consensus model of economic development champions unregulated liberal capitalism. The competition drives your domestic firms to continuously innovate and charge lower prices. Some unprotected firms will get priced out, and Kashmir will experience economic volatility sometimes. Overall, your domestic economy will grow and improve over time.
Import-substituting industrialization is a market-controlling strategy that avoids international economic linkages to support national champion firms instead. High tariffs decrease the importation of manufactured goods into Kashmir, while subsidies streamline domestic industrialization. In the short term, this strategy will result in solid growth and industrialization, but in the long term, the high tariff walls and subsidies will suppress incentives for national champion firms to innovate and charge lower prices. The subsidies will also slowly run up Kashmir's deficits and create a national debt.
Private financial flows will give your domestic firms access to foreign capital they can invest in development and innovation. In particular, foreign direct investment by multinational enterprises will drive domestic competition and bring technology, labor, capital, and managerial expertise to your domestic markets. International bank loans and international portfolio investments will help your firms in the short term, but the volatility of these financial flows will hurt the economic planning of these firms. Your domestic economy will surely grow, but the volatility of private financial flows could spur financial crises.
Overall, you have done a fair job as the Kashmiri economy will likely grow moderately, but your development choices leave Kashmir vulnerable to stagnation and financial crises.